Game changer? Hardly. As the dust settles on this week’s release of the International Atomic Energy Agency’s latest report on Iran, it’s become clear that pre-release hype from Western officials that it would produce a dramatic shift in the international standoff over that country’s nuclear program appears to be wishful thinking. There’s nothing about the report’s contents — all of which had been known to the key players for the past five years — or the fact of its publication that appears likely to shift any of their positions. Instead, it appears to be triggering another round of business as usual: The U.S. and its key Western allies are pressing for new sanctions, unilateral and via the U.N.; Israel is rattling its saber; Russia and China are telling everyone to calm down and resisting any new sanctions; and Iran is keeping its uranium enrichment centrifuges spinning.

Experts parsing with the material say the IAEA’s finding don’t differ substantially with those of the 2007 National Intelligence Estimate which concluded, to the chagrin of the Israelis and other Iran hawks, that Tehran had halted most of its research into weaponization of nuclear material in 2003. The new report does assert — on the basis of a narrower set of sources — that some lower-level apparent weapons research work did, in fact, continue after 2003. But what it calls a “structured program” of weapons research appears to have been mostly halted in 2003.

Still, there’s little question that Iran has used its nuclear program to bring the capability to build nuclear weapons within closer reach. The IAEA has now formally rejected Tehran’s insistence that all of its nuclear work has been for civilian energy production, and has demanded that it account for research work that appears to have no purpose outside of warhead design. But it has hardly confirmed the notion that Iran is racing hell for leather to build nuclear weapons.

A senior Administration official conceded Tuesday that “the IAEA does not assert that Iran has resumed a full-scale nuclear weapons program”, nor does it spell out how much progress has been made in the research effort.

Former U.S. non-proliferation official Mark Fitzpatrick, now at the International Institute for Strategic Studies and an expert on Iran’s nuclear program, wrote of the report

“Most of the reported weapons development work took place between about 1998 and 2003. According to the IAEA, some of the explosives development activity continued after 2003 and may be continuing today, but apparently not in the same comprehensive and dedicated manner. The IAEA report is thus consistent with the 2007 National Intelligence Estimate by US intelligence agencies that Iran in late 2003 suspended its weapons R&D work… How far the weapons work progressed before it was suspended is unclear. There is no indication in the IAEA report that Iran mastered the various processes involved in weapons design and manufacture. The U.S. government assesses that Iran is not yet at that stage. The US and UK governments believe that Iran cannot make a dash to produce nuclear weapons without the IAEA knowing in time.”

Essentially, then, the IAEA report restates what is known, if not always officially acknowledged: Iran seeks the capacity to build nuclear weapons although it hasn’t committed to actually building them — seeking the “breakout” capacity that puts the option of acquiring nuclear weapons within reach of Tehran’s leaders. It also confirms that the policies of the Obama Administration, like those of the Bush Administration before it, have failed to change Iran’s mind. Neither the four sets of U.N. sanctions over the past five years or the additional unilateral measures adopted by the U.S. and its allies; nor the assassination of scientists, sabotage of facilities and Stuxnet computer warm; nor the threat of military action by the U.S. or Israel have halted Iran’s progress, even if they may have slowed it, somewhat.

The reason for the report not shifting the positions of major players is that their major dispute is less over exactly what precisely Iran has achieved until now, and more over how it can be best persuaded to refrain from building nuclear weapons. It’s highly unlikely that a government that sees such weapons as the key to its own survival and is therefore willing to absorb a significant level of punishment in order to acquire them can be stopped from doing so.

Frustration at that failure has once again turned the domestic political discussion in the U.S. — fueled by Israel’s threats of unilateral action — to the perennial silver bullet of the “military option”. But Defense Secretary Leon Panetta on Thursday reiterated the consensus in the U.S. military on the strategic futility of bombing Iran’s nuclear facilities. Success would, at best, simply set back its nuclear program by up to three years, but at risk of starting a wider war. He noted that while Iran continued to pursue “threshold capability” he said, “there continues to be divisions within Iran as to whether or not to actually build a bomb itself.” His predecessor, former Defense Secretary Robert Gates, whose views on the matter Panetta endorsed, had also made clear that bombing would in fact convince the Iranian leadership to go ahead and build nuclear weapons.

Panetta urged the application of further sanctions to show the Iranians “they would pay a heavy price” for proceeding on their current track. But Russia, China, Turkey and other countries that have resisted the push for sanctions reject the premise that pressure and isolation will deter Iran’s plans, and they reject a “military option” out of hand.

The IAEA’s board of governors is to meet next week, and could decide by majority vote to send the matter once again to the UN Security Council. It’s not clear whether such a majority will be achieved, and nobody’s expecting significant action by the Security Council given opposition to significant sanctions from Moscow and Beijing. But European leaders, responding to Israeli threats of military action, will likely press for new measures, possibly targeting Iran’s energy sector (or even its central bank) — although the U.S. is reportedly more hesitant about measure that would be strenuously opposed by some of Iran’s key trading partners (such as China) and could prompt Iranian retaliation that threatened global oil supplies, with resultant economic pain in the West.

Russia, China and others will, more likely, push for a renewal of negotiations, urging Iran to take confidence-building measures but also urging the Western powers to avoid escalating a confrontational strategy that they believe will not produce a positive outcome.

But the domestic political climate in the U.S. — with GOP presidential candidates lining up to proclaim their readiness to stop Iran by force, implying that Obama is ducking a challenge — is hardly conducive to a renewal of engagement with Iran. Even if he follows the cautious advice of his military, Obama will feel compelled to talk tough and add new sanctions to frame any further negotiations. That may make domestic political sense, but it is unlikely to succeed with an Iranian regime that simply digs in its heels in the face of pressure. “You cannot engage and threaten at the same time,” warned University of Hawaii Iran expert Farideh Farhi, recently, in reference to the Obama Administration’s strategy of combining talks with sanctions. “It has not worked, and there is no reason to think now that the threat and the pressure have intensified that the Iranian government will be responsive to an offer of conversation.”

Indeed, a number of foreign policy mavens believe that it was this “carrot-and-stick” combination that doomed Obama’s engagement effort to failure. Former National Security Adviser Zbigniew Brezinski and Gen. William Odom wrote in the Washington Post in 2008,

Current U.S. policy toward the regime in Tehran will almost certainly result in an Iran with nuclear weapons. The seemingly clever combination of the use of “sticks” and “carrots,” including the frequent official hints of an American military option “remaining on the table,” simply intensifies Iran’s desire to have its own nuclear arsenal. Alas, such a heavy-handed “sticks” and “carrots” policy may work with donkeys but not with serious countries.

Thus the Iran dilemma: Military action doesn’t solve the nuclear problem and potentially creates very dangerous new ones; no sanctions strong enough to change Iran’s calculations appear plausible; and the domestic political climate in both Washington and Tehran renders any diplomatic breakthrough unlikely. And Iran could sustain its slow accumulation of nuclear infrastructure without breaking out of the IAEA inspection regime and starting to build weapons, prompting a crisis. That could turn Iran into another Cuba in U.S. foreign policy — subject of a long-term embargo that U.S. domestic politics precludes changing, yet which has actually reinforced the power and longevity of the regime against which it is directed. After all, with Iran’s mounting domestic economic crisis and food inflation soaring, sanctions imposed from outside become the perfect scapegoat for a regime unable to meet its people’s needs, while the constant threat of attack from abroad also sustains a repressive domestic environment that treats political dissent as national treason. For Iran’s supremo, Grand Ayatullah Ali Khamenei, getting the Castro treatment from Washington may even be a desirable goal.